The goal of these studies is to understand the molecular mechanisms by which heritable alterations in gene expression that occur during differentiation and neoplastic transformation are achieved and maintained. 5-azacytidine (5-azaCR), and inducer of heritable phenotypic changes in a variety of cell types has been a valuable tool for examining the relationship between one proposed regulatory mechanism, DNA methylation, and changes in gene expression. We found that DNA methyltransferase (MTase) forms high affinity complexes with 5-azaC residues in DNA which causes its inactivation. This leads to hypomethylation of newly synthesized DNA and subsequently to activation of specific genes. Our studies led to the identification of additional non-histone nuclear proteins that lacked DNA MTase activity but had high affinity for 5-azaC in DNA. If the cause and effect of their binding to 5-azaC residues in DNA is analogous to that of DNA MTase, it can be predicted 1) that the normal function of these proteins requires specific interactions with C or 5-methylC (5mC) residues in DNA and 2) that binding to 5-azaC interferes with this function. Reports demonstrating that 5-azaCR treatment causes heritable changes in gene expression in organisms without detectable 5mC in their DNA suggest that some of the proteins that bind to 5-azaC in DNA may be involved in regulating gene expression through processes that do not involve changes in DNA methylation. Thus, our specific aims are: I. To determine whether non-histone nuclear proteins with high affinity for 5-azaC in DNA regulate transcription directly as trans-acting factors or indirectly through effects on DNA methylation. Proteins with high affinity for 5-azaC residues in DNA will be purified and tested for a) sequence specificity of binding, b) ability to alter the rate and/or specificity of initiation of RNA synthesis on defined templates and c) ability to affect the rate or site specificity of DNA methylation of defined substrates. II. To determine how 5mC and 5-azaC residues in specific gene regions affect regulation of gene expression. Transient expression of genes modified by regional or site specific incorporation of 5mC or 5azaC will be compared with that of unmodified genes. The same genes will be utilized to study the effect of 5mC or 5azaC residues in specific gene regions on the binding specificity of proteins that recognize known regulatory sequences. Cloned hepatitis B virus DNA will be used as the substrate for all experiments since the expression of viral genes is affected by methylation and 5azaCR treatment.